Posts Tagged ‘Peter Wallison’

We’re constantly being told that Obama has done a great deal to make our economy stronger. Because who wouldn’t rather have 9.1% unemployment than that 7.6% that Obama started out with.

The thing that most killed the US economy in 2008 was the sheer weight of godawful subprime mortgages that Democrats imposed on Fannie Mae, Freddie Mac and all the other mortgage lenders in order to create more “fairness” and allow everyone (especially racial minorities) to have “the right” to own a home whether they could actually afford to do so or not. Fannie Mae and Freddie Mac were “Government Sponsored Enterprises,” all the investors knew. So even as Fannie and Freddie began bundling together thousands of riskier and ever riskier mortgages into giant mortgage backed securities to advance Democrat-enacted policies, large investment houses continued to gobble them up. After all, this was an arm of the United States Government – and the United States Government ALWAYS pays its debts.

Like all scams, it worked for a while. But as soon as there was a correction in the dramatically overvalued housing market, the whole boondoggle began to implode. And since Fannie and Freddie had bundled all kinds of bad mortgages in with the good ones, there was absolutely no way for anyone to know how much risk was contained in any of these giant investment vehicles all these giant private banking houses found themselves holding.

And suddenly the perception that Government Sponsored Enterprises Fannie Mae and Freddie Mac were “safe investments” turned into a “misperception.” And the fecal matter began to hit the rotary oscillator bigtime.

Fannie and Freddie were the first to collapse. The big private players who had played ball with them shortly followed.

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

Republicans were demonized for “deregulation” by the dishonest Democrat Party machine. But they TRIED to regulate what needed to be regulated. Democrats stopped them.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

Fannie Mae and Freddie Mac are so big — they own or guarantee roughly half of the nation’s $12 trillion mortgage market — that the thought that they might falter once seemed unimaginable. But now a trickle of worries about the companies, which has been slowly building for years, has suddenly become a torrent.

And it was FANNIE and FREDDIE that collapsed FIRST before ANY of the private investment banks, which collapsed as a result of having purchased the very mortgaged backed securities that the Government Sponsored Enterprises SOLD THEM. It wasn’t until Fannie and Freddie collapsed that investors began to look with horror at all the junk that these GSE boondoggles had been pimping.

The man who predicted the collapse in 1999 wrote a follow-up article titled, “Blame Fannie Mae and Congress For the Credit Mess.” It really should have read, “Blame DEMOCRATS.” Because they were crawling all over these GSEs that they had themselves created like the cockroaches they are. But Wallison is nonpartisan.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Why was Barney Frank deceitfully claiming that Fannie and Freddie weren’t facing “any kind of financial crisis”? BECAUSE REPUBLICANS WERE RIGHTLY WARNING THAT THEY WERE.

REP. BARNEY FRANK, D-MASS.: “I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward.”

So we blew up nearly COMPLETELY BECAUSE OF DEMOCRAT POLICIES. But Democrats along with an ideological mainstream media that is the worse since Joseph Goebbels was the Nazi Minister of Propaganda were ready. They ran on a platform that it happened while Bush was president, and that therefore Bush was entirely responsible for the thing he tried over and over again to fix while Democrats used their power to block those efforts.

Let me just say “Franklin Raines.” Raines as Fannie CEO presided over Enron-style accounting policies and got $90 million in his account because of those corrupt policies. But Raines was the first BLACK CEO of Fannie Mae. And even though he was a Democrat and a Clinton guy, President Bush lacked the courage to push the “first black Fannie Mae CEO” out. Which of course is the same reason that the “first black Fannie Mae CEO” didn’t do hard time in prison where he belonged. “Political correctness” is a demonic device by which liberals protect themselves – usually from going to prison where they ought to go. He got a sweetheart deal basically so Republicans wouldn’t be accused of being racists by
Democrats who of course call them racists no matter what they do. My main point is simply that it was Democrats, Democrats, DEMOCRATS who did this to us.

Morgenson focuses on the managers of Fannie Mae, the government-supported mortgage giant. She writes that CEO James Johnson built Fannie Mae “into the largest and most powerful financial institution in the world.”

But in the process, Morgenson says, the company fudged accounting rules, generated big salaries and bonuses for its executives, used lobby and campaign contributions to bully regulators, and encouraged the risky financial practices that led to the crisis.

Morgenson – again a New York Times writer and not someone from Fox News – said of Fannie Mae on Larry Kudlow’s CNBC program on Monday, June 13: “Whatever Fannie Mae did, everybody else followed.” And of course they all followed right into an economic Armageddon created by Democrats for Democrats.

But who got blamed? Republicans, of course. George Bush and Republicans were to Obama and the Democrats what Emmanual Goldstein was to Big Brother in 1984. George Bush and Republicans were what the Jews were to Adolf Hitler. Fascists always need a bogeyman. And so the people who were truly to blame turned the people who tried futilely to stop them into the scapegoats. All with the mainstream media’s complicity.

The analogy would be holding the police officer who tried but failed to catch the rapist for the rape of the woman rather than holding the actual rapist who raped her responsible. But it was easier to say “This is the result of President Bush’s failed Republican policies” than it was to actually explain the facts to an enraged Attention Deficit Disorder-ridden ignorant pop culture – particularly when virtually no one in the biased mainstream media had any intention whatsoever of telling the truth.

Barack Obama – the ACORN community organizer who pushed these very America-killing policies – ran a demagoguing campaign promising to fix everything.

When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries, Pimco’s Bill Gross told CNBC Monday.

Much of the public focus is on the nation’s public debt, which is $14.3 trillion. But that doesn’t include money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures.

The government also is on the hook for other debts such as the programs related to the bailout of the financial system following the crisis of 2008 and 2009, government figures show.

Taken together, Gross puts the total at “nearly $100 trillion,” that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won’t find a solution overnight.

“To think that we can reduce that within the space of a year or two is not a realistic assumption,” Gross said in a live interview. “That’s much more than Greece, that’s much more than almost any other developed country. We’ve got a problem and we have to get after it quickly.”

Gross spoke following a report that US banks were likely to scale back on their use of Treasurys as collateral against derivatives and other transactions. Bank heads say that move is likely to happen in August as Congress dithers over whether to raise the nation’s debt ceiling, according to a report in the Financial Times.

“We’ve always wondered who will buy Treasurys” after the Federal Reserve purchases the last of its $600 billion to end the second leg of its quantitative easing program later this month, Gross said. “It’s certainly not Pimco and it’s probably not the bond funds of the world.”

Pimco, based in Newport Beach, Calif., manages more than $1.2 trillion in assets and runs the largest bond fund in the world.

Gross confirmed a report Friday that Pimco has marginally increased its Treasurys allotment—from 4 percent to 5 percent—but still has little interest in US debt and its low yields that are in place despite an ugly national balance sheet.

“Why wouldn’t an investor buy Canada with a better balance sheet or Australia with a better balance sheet with interest rates at 1 or 2 or 3 percent higher?” he said. “It simply doesn’t make any sense.”

Should the debt problem in Greece explode into a full-blown crisis—an International Monetary Fund bailout has prevented a full-scale meltdown so far—Gross predicted that German debt, not that of the US, would be the safe-haven of choice for global investors.

America is going down because her stupid citizens wickedly voted for corrupt dishonest Democrat fools – the very fools who imploded our economy – to have complete power. Nancy Pelosi took over dictatorial control in the House of Representatives, and Harry Reid took over the US Senate, in 2006.

Thanks to Obama, America is now worse off than Greece. But that didn’t stop Obama from offering to bail out Greece. Maybe it’s because George Soros is Greek; maybe because the American left has always adored the European-style socialism in spite of Thomas Jefferson’s warning that “the comparison of our governments with those of Europe is like a comparison of heaven and hell.” Maybe because Obama simply WANTS hell for America. But there you have it.

Republicans acknowledged they failed to live up to their values and spent too much. But the last Republican budget (Fiscal Year 2007) passed in 2006 had only a $161 billion deficit. The very next Democrat budget for FY 2008 had a deficit of $459 billion – nearly three times larger than the one they’d demonized Republicans for. Then their FY-2009 budget dwarfed that deficit with a black hold of red ink deficit of $1.4 TRILLION. That was more money than any government in the history of the world had ever contemplated. But Democrats dwarfed that the very next year with a FY-2010 budget with a $1.6 trillion deficit. And as for FY-2011, the Democrat Congress simply refused to perform its most basic duty of governance and didn’t even bother to pass a budget. Republicans are now forced to do the last disgraced Democrat-controlled Congress’ job for them – and Democrats are demonizing them for it.

That’s how this game is played. Democrats are fascist demagogues who shrilly launch into Republicans as they try to save the American people from unparalleled future suffering. They are people who ROUTINELY demonize, demonize, demonize until THEY are the ones forced to call for the very things they demonized and tried to prevent from happening. But by the time they react this time, just as before, it will be too late.

Try this on for size: our actual debt isn’t the $14 trillion we constantly hear about; it’s more like $200 trillion. And even THAT gargantuan number doesn’t take into account the massive debts that all the liberal labor unions have amassed in state pensions (e.g., California’s public pension system has unfunded liabilities of $500 billion). We cannot possibly hope to pay this – and yet Democrats demand more and more and more, and demagogue Republicans for even trying to cut millions when we need to cut TENS OF TRILLIONS or collapse.

Democrats run ads showing a look-a-like of Republican Rep. Paul Ryan pushing an old lady off a cliff; but they want every single senior citizen to die terribly as the Medicare system completely collapses while they refuse to do anything to fix it – as even Bill Clinton openly acknowledged.

We are going to end like the PIIGS – Portugal, Ireland, Italy, Greece and Spain- because we elected Democrat swine to ensure we perished like pigs.

When that happens to us it will be the worst nightmare in history. 300 million Americans are going to go into an insanity of panic – and of course the violence will begin with the left. If you don’t have an arsenal, someone will kick down your door and murder your whole family just to eat the food in your house. And that hell on earth will be entirely because you trusted Democrats like Anthony Weiner to run your health care, your pension, your economy, your life.

I hope you vote in 2012 like your very LIFE was at stake in these elections. Because this time it truly is.

“I am absolutely certain that generations from now, we will be able to look back and tell our children that this was the moment when we began to provide care for the sick and good jobs to the jobless; this was the moment when the rise of the oceans began to slow and our planet began to heal… This was the moment — this was the time — when we came together to remake this great nation …”

– hasn’t seemed to work out very well in the real world. I mean who talks like that but a fascist demagogue promising a false Utopia, anyway? Not that most liberals have any clue whatsoever about the real world, mind you.

The evidence is crystal clear that Obama is a fascist and a demagogue. But the mainstream media is every bit as unlikely to tell the truth about Obama as Joseph Goebbels’ Ministry of Propaganda was likely to tell the truth about their Fuhrer.

The New York Times once said – as part of the irrational fascistic hype surrounding Obama – that:

WASHINGTON — At the core of Senator Barack Obama’s presidential campaign is a promise that he can transcend the starkly red-and-blue politics of the last 15 years, end the partisan and ideological wars and build a new governing majority.

Did Obama ever once come close to actually fulfilling that “core presidential promise”???

President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package

When [Republican Rep. Eric] Cantor tried to justify his own position, Obama responded: “Elections have consequences, and at the end of the day, I won.”

Were those really the words that would “transcend the starkly red-and-blue politics of the last 15 years”??? In taking that stand, was there actually any chance whatsoever that Obama would “end the partisan and ideological wars”??? Is anyone frankly so morally and intellectually stupid to see these tactics as they way to “build a new governing majority”???

And of course, shortly after the American people rejected Obama in the largest shallacking in modern American history and voted against the Democrat Party in droves, Nancy Pelosi began to further degenerate into fascism (where elections shouldn’t matter unless the fascists win them), saying: “elections shouldn’t matter as much as they do.”

As I said, Obama is a fascist bully and a cynical demagogue. And yet the mainstream media has the unmitigated chutzpah to continue to insanely depict this cynical, lying, hypocrite demagogue as an inspirational figure.

The American people and the mushroom have something in common: both are kept in the dark and fed manure.

So you can understand why the American people – for all the information available to them – are so terribly ignorant about just what the hell is going on in our political system.

But as misinformed and lied-to as Americans are when it comes to the sea of lies they are presented with as “news,” they are still aware that fewer of them have jobs, fewer of them have homes, their food cost more, their fuel cost more and that the quality of their lives are rapidly slipping away under the policies of a failed president and his failed party.

America’s Best DaysThose Confident That America’s Best Days Lie Ahead Down to 31%
Monday, April 25, 2011

Voter confidence that the nation’s best days are still to come has fallen to its lowest level ever.

A new Rasmussen Reports national telephone survey of Likely Voters shows that just 31% believe America’s best days are in the future. That’s down three points from last month and is the lowest result found in polling since late 2006.

Fifty-three percent (53%) believe America’s best days are in the past, also the highest measurement in over four years. Sixteen percent (16%) are undecided. (To see survey question wording, click here.)

Separate polling finds that only 22% of Likely Voters believe the United States is now heading in the right direction. That ties the lowest level found during Barack Obama’s presidency.

While majorities of Republicans (68%) and voters not affiliated with either major political party (52%) believe America’s best days are in the past, a plurality of Democrats (45%) thinks its best days still lie ahead.

Fifty-eight percent (58%) of white voters believe America’s best days have come and gone, but the same number of black voters (58%) feel the opposite is true.

[…]

And of course, it is true: America’s days truly ARE behind us as long as Barack Hussein Obama and as long as Democrats are able to continue to lead. Either Democrats will go down, or America will go down.

But, liberals say, it was BUSH who made the economy fail. Two things: 1) how many years should that line of garbage continue to succeed? And 2) it was never true to begin with (also see here).

Do you know that Democrats had total control of both the House and the Senate from 2006 until 2010???

George Bush tried SEVENTEEN TIMES to warn Congress that unless we got control of the out-of-control Democrat-controlled Fannie Mae and Freddie Mac and the out-of-control housing and housing mortgage market that it was poisoning with piles of bad debt, our economy would go under. The problem had festered because Bush had reappointed the first black Fannie Mae CEO because of political correctness. Franklin Raines was a failure and a corrupt fraud who disguised massive debt. Further, fearing the same political correctness, Republicans had allowed themselves to be repeatedly stymied in their attempts to reform the Government Sponsored Enterprises Fannie and Freddie as Democrats screamd “racism.” John McCain was if anything even more clear in 2006 when there was still time to fix the developing crisis. McCain wrote (in 2006):

Congress chartered Fannie and Freddie to provide access to home financing by maintaining liquidity in the secondary mortgage market. Today, almost half of all mortgages in the U.S. are owned or guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

McCain asked, “Who would actually pay this massive debt for these incredibly risky liberal policies if Fannie or Freddie could not?’ And we now have the answer to that question, don’t we???

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

REP. BARNEY FRANK, D-MASS.: “I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward.

They’re in a housing market. I do think their prospects going forward are very solid.”

John McCain correctly predicted a disaster. Barney Frank was still spouting outrageous lies just one month before the bottom fell out of Fannie Mae and Freddie Mac and then caused the bottom to fall out of the entire economy. Republicans were right and Democrats were disasterously wrong. And the American people responded by electing Democrats and purging Republicans. Because we were lied to, and because we have become a bad people who believe lies.

Democrats blocked every single move by both the Republicans and by George Bush. They actually threatened filibusters to prevent Bush from fixing the broken system that failed and it was DEMOCRATS who took our economy down the drain.

BEIJING: The Chinese economy will surpass that of the US by 2016, the International Monetary Fund ( IMF )) has predicted.According to the IMF’s forecast, based on “purchasing power parities”, China’s gross domestic product (GDP) will rise from $11.2 trillion in 2011 to $19 trillion in 2016, while the American economy will increase from $15.2 trillion to $18.8 trillion.

China’s share of the global economy will ascend from 14 percent to 18 percent, while the US’ share will descend to 17.7 percent, China Daily reported.

The Economist had predicted in December 2010 that China would overtake the US in terms of nominal GDP in 2019.

At the same time all of the other growing disasters is taking place, we have a crisis in the price of oil. And Obama has done nothing but exacerbate that crisis with energy policies that are even more destructive than Jimmy Carter’s.

Do you feel your nation growing smaller and smaller and weaker and weaker? That is the hope and change you voted for.

In the time that Obama has been president, we’ve gone from predicting China would overtake us by 2030, to 2019, to just five years away. And mark my words, it will be moved up yet again, before they overtake Obama’s ignorant stupidity even faster than that.

Under Obama, and due to his immoral and criminally reckless policies, we are spending like fools and at the same time insanely inflating our money supply (under the euphamism of “qantitative easing” or QE2. And here are the results:

The U.S. dollar’s downward slide is accelerating as low interest rates, inflation concerns and the massive federal budget deficit undermine the currency.

With no relief in sight for the dollar on any of those fronts, the downward pressure on the dollar is widely expected to continue.
The dollar fell nearly 1% against a broad basket of currencies this week, following a drop of similar size last week. The ICE U.S. Dollar Index closed at its lowest level since August 2008, before the financial crisis intensified.

“The dollar just hasn’t had anything positive going for it,” said Alessio de Longis, who oversees the Oppenheimer Currency Opportunities Fund.

The United States of America is dangerously close to complete collapse. One wrong move, one piece of bad news, just one thing, could send us into a collapse that will be impossible to stop.

And we are either being led by a total fool, or even worse, we are being led by a man who is actively plotting to collapse America to impose a radical leftwing ideology, and who doesn’t care one iota more about the American people than Adolf Hitler cared about the German people.

I’m sure you have probably picked up on my angry tone. I am angry; I’m beyond angry. Why? Because I see the beast foretold by the book of Daniel and the book of Revelation coming. I see the collapse coming, and the Antichrist riding in on his white horse to save the day. And I see that the same liberals, the same progressives, the same Democrats who caused this collapse will be the ones to welcome this coming world dictator. And it will be these same Democrats who call for the American people to take his mark on their hands or on their foreheads so that they can join the rest of the world and buy and sell.

Frank: “well one of my biggest differences with the Bush administration, even with the Clinton administration, was that they overdid that. I have always been critical of this effort to equate a decent home with home ownership. I think we should have been doing more to provide rental housing, my efforts have been to try and get affordable rental housing I was very much in disagreement with this push into home ownership and I think the federal government should not be artificially doing that. The goal is for people to have decent housing and I think beginning in the Clinton administration, exacerbated by Bush, we pushed people too much into home ownership…”
– Barney Frank, May 20, ‘2010 on CNBC.

And here’s Frank from 2005 documenting the fact that Barney Frank in 2010 is a rank liar:

“This is a very important resolution, particularly at this time, because we have, I think, an excessive degree of concern right now about home ownership and its role in the economy.
Obviously, speculation is never a good thing. But those who argue that housing prices are now at the point of a bubble seem to be missing a very important point. Unlike previous examples, where substantial excessive inflation of prices later caused some problems, we are talking here about an entity, home ownership, homes, where there is not the degree of leverage that we have seen elsewhere.

This is not the dot-com situation. We had problems with people having invested in business plans for which there was no reality and people building fiber-optic cable for which there was no need. Homes that are occupied may see an ebb and flow in the price at a certain percentage level,but you will not see the collapse that you see when people talk about a bubble.

So those of us on our committee in particular will continue to push for home ownership.
– Barney Frank, 2005

You’re right, Barney. It wasn’t the Dot-com situation. It was a hundred times WORSE than the Dot-com situation, even given as bad as the Dot-com bubble was. And yeah, you sure were right when you said there wouldn’t be a collapse, weren’t you?

So first of all, we have Barney Frank – liberal Democrat par excellence – acknowledging that the bad policy that led to the mortgage market meltdown was actually a CLINTON policy that Bush merely continued (most likely because he knew he’d be called a “racist” the moment he ended a program that gave billions of dollars to minorities to buy homes they couldn’t afford).

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

It’s beyond asinine that Democrats blame Bush for ruining the economy, and praise Clinton as having the mostest wonderfulest economy ever, when it was a Clinton program that ruined the Bush economy. But that’s the mainstream media narrative for you.

So Barney Frank reminds us that the destruction of the Bush economy was bookended by massive Clinton failures – the Dot-com bubble collapse in 2001 and the housing market bubble collapse in 2008. And Clinton was never blamed for either of them by the propagandist mainstream media.

The second thing you can notice is that Democrats like Barney Frank – who were so quick to pounce all over the mortgage meltdown and blame Bush for it – were not only the ones who created the problem, but were the ones who defended the problem.

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

So Bush WANTED to regulate, in contradiction to all the lies that you heard.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

What do we have, even in the pages of the New York Slimes? A prediction that as soon as the economy cooled off, the mortgage market wold explode like a depth charge and the government would have to step in to prevent a catastrophe? From a Clinton program?

The New York Times acknowledged that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac “buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.”

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more. . . .

In a nutshell, Fannie and Freddie, acting as Government sponsored enterprises, bought tens of millions of mortgages, and then repackaged them into huge mortgage-backed securities that giant private entities such as Bear Stearns, AIG and Lehman Brothers purchased. What made these securities particularly attractive to the private banking entities was that these securities were essentially being sold – and had the backing – of the United States government.

The Role of the GSEs is to provide liquidity and stability to the U.S. housing and mortgage markets. Step 1 Banks lend money to Households to purchase and refinance home mortgages Step 2 The GSEs purchase these mortgage from the banks Step 3 GSEs bundle the mortgages into mortgage-backed securities Step 4 GSEs sell mortgage-backed and debt securities to domestic and international capital investors Step 5 Investors pay GSEs for purchase of debt and securities Step 6 GSEs return funds to banks to lend out again for the issuance of new mortgage loans.

Now, an intelligent observer would note a conflict: the GSE’s role was to “provide stability,” and yet they were taking on “significantly more risk” in the final year of the Clinton presidency. What’s wrong with this picture?

The GSEs Fannie Mae and Freddie Mac were designed to bundle up the mortgages into mortgage backed securities and then sell them to the private market.

Fannie Mae is exempt from SEC [Securities and Exchange Commission] regulation. Which screams why Bush wanted to regulate them. This allowed Fannie Mae to bundle up mortgages, which were then rated AAA with no requirement to make clear what is in the bundle. Which screams why Bush wanted to regulate them.

This is what has allowed toxic instruments that have been sold across the world. It also created a situation where money institutions did not know and could not find out whether potential inter-bank business partners were holding these “boiled babies on their books, complete with a golden stamp on the wrapping,” rather than safe instruments. This then inclined banks to a natural caution, to be wary of lending good money to other banks against these ‘assets’. And thus banks refused to lend to one another.

Congress chartered Fannie and Freddie to provide access to home financing by maintaining liquidity in the secondary mortgage market. Today, almost half of all mortgages in the U.S. are owned or guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

And thus you had a financial disaster created by one William Jefferson Clinton and one Democrat Party. And now a second act of economic destruction is being planned by Barack Obama.

The 2008 economic collapse that Democrats were elected to fix was itself created by Democrats who will now continue the very policies that created the disaster in the first place.

Democrats then demonized Bush for merely being there when the disaster happened. When they had created the mess, and when they had refused to allow Bush to do anything to prevent a Democrat-created disaster that he and other Republicans saw coming, but ultimately lacked the courage to stop.